SEC opens door for crypto-style trading of U.S. stocks
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The Securities and Exchange Commission is opening the door for crypto-style trading of U.S. stocks, allowing tokenized shares to trade on blockchain-based venues under a new regulatory exemption.
Why it matters: The move brings a core piece of crypto-market infrastructure into the $75 trillion U.S. stock market, creating a new way for investors to buy and sell shares.
Driving the news: The SEC on Thursday issued a pair of five-year, conditional exemptions from current securities laws defining exchanges and dealers. The exemptions give certain blockchain-based trading platforms and automated liquidity providers a path to offer trading in tokenized U.S. stocks.
- Individual companies can opt out: The order requires venues to notify issuers 30 days before offering tokenized versions of their shares, giving companies the right to decline participation.
- Tokenized stocks permitted to trade under the exemption will not be derivatives and will carry the same rights and privileges as the shares they represent, including dividends and voting rights, according to the order.
The big picture: The SEC's "Innovation exemption" comes just days after long-sought crypto market-structure legislation failed to advance in a key Senate procedural vote.
- While negotiations over the Clarity Act have dragged on, the SEC has been working for over a year using its statutory authority to write new rules for the crypto sector to operate within the U.S.
- "The Innovation Exemption is designed to resolve challenges that have prevented responsible innovation from taking root in the United States while providing investor protections and market integrity standards," SEC chairman Paul Atkins said in a statement.
Between the lines: While the order is in effect immediately, it also calls for public comment about possible modifications and potential next steps.
- The exemptive relief and the experience gained from people engaging in the market are meant to help inform final rulemaking, an SEC official said.
- "The Innovation Exemption, while temporary, would allow TSVs to trade tokenized NMS stock in a permissioned environment today while the Commission considers the need for additional action to facilitate on-chain trading," Atkins said.
Zoom out: Offshore venues currently offer trading in synthetic versions of tokenized products purportedly linked to U.S. stocks. The SEC's move today is in part an effort to lessen the appeal of those products, officials said.
What we're watching: It's unclear how receptive U.S. public companies will be to permitting trading of tokenized stocks on these platforms.
- SEC officials acknowledged that unknown, but pointed to advantages that a tokenized model might have for issuers.
